Five tech stocks with upside worthy of buying ahead of earnings, Wells Fargo says
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A slate of tech stocks could be set to pop as earnings season revs up, Wells Fargo analysts say. The firm said it sees a slew of overweight-rated companies well positioned for upside. CNBC Pro combed through Wells Fargo research to find the firm’s favorite tech stocks as earnings begins. They include Microsoft , Uber, Pinterest, Roblox and Monday.com. Uber Analyst Ken Gawrelski said he’s staying bullish heading into the ride-sharing company’s earnings report. Uber is expected to post results in early May. “With favorable market reception to the recent Investor Day & MT [medium term] guide, we don’t expect 1Q results to materially change views,” he wrote. Still, the firm thinks investors should buy the stock now: Gawrelski lifted his price target on Uber to $95 per share from $90. That suggests 26% upside from Friday’s close. There is one likely underappreciated catalyst heading into the quarterly results, according to the firm. Gawrelski sees price increases as a tail wind, adding that they help offset driver insurance premiums. Shares of the company are up 22% this year. “We believe the stock is likely to outperform as consensus converges on our estimates over the next 18 months,” the analyst wrote. Roblox Roblox is down 16% in 2024, but Gawrelski also thinks shares are worth buying now. The online gaming company is scheduled to report earnings in early May. Roblox’s volatility is “out of synch” with its fundamentals, noted Gawrelski. He expects outperformance from the stock following “in-line to better” results on the first-quarter print and guidance. The analyst will be looking for updates on the company’s ad platform, which he said is imperative to the bull case for the stock. “Consider cont’d progress with ad platform build-out as critical to the medium/long-term story,” Gawrelski added. Booking trends remain healthy and could also surprise to the upside, according to the firm. Monday.com Shares of the project-management software company are too attractive to ignore, according to Wells Fargo. Monday.com is expected to report earnings in May. Analyst Michael Berg initiated coverage of the stock with an overweight rating earlier this week. There is no shortage of positive catalysts for Monday.com shares, he said. “With a differentiated work mgmt platform, MNDY has a number of robust growth levers to capture market share to drive durable growth…,” Berg wrote. The analyst said he likes Monday.com’s “differentiated & expanding platform,” as well as its “robust and balanced operating profile.” Berg also said the company has pricing power and the chops to withstand a bumpy macro environment. “Notably, despite the macro impacts, partners remain enthused about MNDY’s medium- and long-term trajectory, and plan to continue making significant investments into their respective practices,” he said. It’s the company’s growth prospects that make the stock so well positioned, Berg said. Shares of Monday.com are up nearly 3% year to date. Roblox “RBLX shares significantly underperformed in 1Q despite solid FY24 guidance and healthy engagement trends. See stock volatility out of synch w/ fundamentals & expect stock outperformance on an in-line to better 1Q print and guide. … Consider cont’d progress with ad platform build-out as critical to the medium/long-term story.” Pinterest See 1Q print as key to PINS bull case. … We believe Pinterest is making the optimal strategic move to outsource monetization to third parties to overcome its attribution and scale challenges. This includes an announced partnership with Amazon, and future expected partnerships with other scaled retail media networks.” Microsoft “Still see MSFT as cleanest way to play AI; note 1) lack of clear competitive alternatives, 2) significant early mover advantage, and 3) lack of material missteps has only extended the co’s differentiation — in our view leaving a clear runway for continued strength vs peers in ’24. … Path Well-Paved for Sustained, AI-Driven Uplift.” Monday.com “With a differentiated work mgmt platform, MNDY has a number of robust growth levers to capture market share to drive durable growth. … Proprietary Architecture Powering Differentiated & Expanding Platform. … Robust & Balanced Operating Profile. … Notably, despite the macro impacts, partners remain enthused about MNDY’s medium- & long-term trajectory, and plan to continue making significant investments into their respective practices.” Uber “With favorable market reception to the recent Investor Day & MT [medium term] guide, we don’t expect 1Q results to materially change views. … Our data shows Uber likely took price to offset insurance renewals on 3/1, which represents an EBITDA tailwind to 2Q & 2024. … We believe the stock is likely to outperform as consensus converges on our estimates over the next 18 months.”
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